'Reset' by The Plain Dealer is puzzling to many in industry

The first installment in an extensive investigation by two Plain Dealer reporters on the failure of Cleveland police to follow up on medical evidence gathered from rape victims over two decades rolled out last Monday, Aug. 5.
But not in ThePlain Dealer, which for decades has been the dominant daily news medium in Northeast Ohio. Instead, it appeared on Cleveland.com, the website owned, like ThePlain Dealer, by Advance Publications Inc.
The newspaper's print home delivery subscribers didn't even receive a home-delivered paper that day. Print-only readers were unaware until they received their Sunday, Aug. 11, newspaper that Leila Atassi, Rachel Dissell and 16 others in the news organization had invested months of work creating a multimedia package called “Reinvestigating Rape.”
Cleveland has become the second-largest American city, after Detroit, to lose daily home delivery of a newspaper. Advance Publications is using a strategy that has much of the rest of the newspaper industry scratching its head. More quickly than other news organizations, it is replacing its print newspapers as the flagships bolster their local operations with their websites.
Even more controversial within the industry is Advance's decision not to begin charging a fee for its online content. Instead, it plans to continue to give it away for free.
Terry Egger, chairman of Plain Dealer Publishing Co., calls it “a reset of the business model in order to sustain and be a viable business going forward.”
Importantly, Mr. Egger and his executive team believe they can outperform an industry that is struggling to find a financially sound path to the future.
In a 50-minute interview in a fourth-floor conference room atop the Plain Dealer Building on Superior Avenue, Mr. Egger and three top executives of the new Northeast Ohio Media Group — president Andrea Hogben; Mike Maleski, vice president of sales and marketing; and Chris Quinn, vice president of content — laid out and defended a strategy that is shaking up the news and marketing landscape of Northeast Ohio and has drawn considerable skepticism in the broader world of media and publishing.
“You've got to go where the puck is moving to, not where it is now,” Mr. Egger said, using a hockey analogy. “The rise in digital consumption of information and marketing on digital platforms is absolutely going to be a bigger part of the future, and as a company, we wanted to get there fast.”
All four executives argued that the company isn't abandoning print and the thousands of subscribers who have developed an ingrained habit for ink-on-paper news.
“It isn't an either-or strategy,” Mr. Egger said. “But if the focus is not on the digital you run the risk of not developing it as well as and as rapidly as you need to.”
Ms. Hogben argued that the strategy can succeed, despite the industry skepticism. While she acknowledged that digital advertising revenue industrywide is growing very slowly while print ad dollars flee rapidly, she said Advance is proving it can do better than the rest of the industry.
“I will tell you that early metrics at some of our sister markets that have gone through this change are quadrupling the industry average,” she said. “That is what needs to happen so that that irreversible print decline somehow very soon intersects with the growth (in digital ad revenue).”
Among the sister markets Ms. Hogben referred to are Advance Publications operations in New Orleans, Syracuse, N.Y., and Birmingham, Ala. Those organizations are as much as a year ahead of Cleveland.

Downward trajectory

After hinting at changes last September, on April 4 the news organization formally announced it was turning its operations upside down. Its primary distribution channel would be digital — the cleveland.com website. A newspaper would still be published seven days a week but it would be home delivered on only Wednesday, Friday, Saturday and Sunday. About 62% of the paper's 216,122 circulation has been home delivered.
In addition, the organization has been split into two businesses — the existing Plain Dealer Publishing, where the newspaper will continue to be printed, and the Northeast Ohio Media Group, a new entity that will operate cleveland.com and guide the newsgathering going forward.
Much of the focus in recent weeks has been on the layoff of employees.
At the end of July, the company announced that 50 journalists would be laid off from Plain Dealer Publishing, leaving it with an editorial staff of about 110. In June, about 60 business-side employees were laid off. Looking more broadly, the local company reported 1,600 employees in 2003. Today, Ms. Hogben said, the total is 800, though NEOMG is beginning to hire.
As abrupt and disruptive as the transition in Cleveland may appear, the seismic shift in the news industry — away from print — is inescapable.
In the last decade, the circulation of The Plain Dealer has declined rapidly, from 332,894 daily in 2003 to 216,122 in the last audited tally in March of this year. That is typical of daily newspapers across the country.
The decline in advertising — the main source of revenue for newspapers — is even more dramatic. As a private company, Advance and its newspapers do not disclose financial information, but its newspapers are not believed to be surviving the transformation better than those at other media companies.
According to the an annual survey of news media by the Pew Research Center's Project for Excellence in Journalism, U.S. newspapers have suffered a staggering loss of advertising revenue, from a record $49.5 billion in 2005 to $22.3 billion in 2012, a loss of 55% of ad revenue.

Mr. Doctor, give us the news

The entire industry believes the future of news is online, though no one in the industry has found a secure path forward and few are following the fast pace of Advance's changes.
Most industry observers believe Advance is taking a big risk by moving away from print so decisively and by adopting a strategy of delivering news for free online. They estimate news companies are gaining only $1 of digital ad revenue for every $13 to $19 of print revenue they are losing, a pace that is not picking up quickly. The staff layoffs, they believe, are critical for the Advance newspapers. Only through cost-cutting can they survive in the short term until online revenue becomes more robust.
Industry analyst Ken Doctor has called the Advance strategy “shock therapy” because of its risky financial model. Mr. Doctor is a media analyst with Outsell Inc., a Burlingame, Calif.- based consulting firm.
“Much better to improve the seven-day print product, add usable mobile apps, and then price up, even if you have a mind to cut home delivery,” he wrote about the Advance strategy in June on his blog, Newsonomics. “That way, you've established a new, higher price — and the monetary value of digital.
“Instead, Advance maintains what now seems like a nonsensical approach to paid print and free digital, and that bodes ill for holding on to current print subscribers, much less convincing many people to pay much for all-access (print and digital) down the road,” wrote Mr. Doctor.

True believers

The local Advance executives are unswayed in their belief they are on the right path.
In addition to believing their financial model can work, they believe they have another key asset that will keep readers and attract advertisers — the quality and exclusivity of the news its editorial operations gather.
They believe that, despite the layoffs, the organization is a strong news operation.
“It's fundamental in the sales and marketing message that the entire foundation around which we can sell and where we can sustain the business model is rooted in having quality journalism,” Ms. Hogben said.
Mr. Quinn believes the digital first “Reimagining Rape” series, with its videos and interactive maps in addition to traditional text and photography, demonstrates that strength.
“It was designed as an online series because that is where people are getting their news by and large,” he said. “It was designed for that audience and we wanted to show people what we can do with those digital tools.”
He added, though, that print readers will get similar treatment.
“We'll do a significant splash with that series,” he said. “We want to hit the biggest audience possible and the biggest audience in print will be on Sunday.”